Context:
The Reserve Bank of India (RBI) has permitted foreign investors to invest the entire surplus balance in their Vostro accounts into central government securities. This move is expected to deepen trade settlement in rupees and provide better returns on idle funds.
Key Highlights:
- What is a Vostro Account?
- An account held by a domestic bank on behalf of a foreign bank.
- Used for holding rupee-denominated balances arising from trade transactions between India and other countries.
- New Investment Permission
- Foreign investors can now invest entire surplus balances in central government securities.
- Aims to promote international trade settlement in INR.
- Expected Benefits
- Boosts the attractiveness of rupee trade arrangements.
- Provides a secure and interest-bearing option for surplus funds.
- Supports RBI’s strategy to internationalise the rupee.
